For decades, banks could afford to move slowly. Now, speed is table stakes. In a world of instant payments and real-time expectations, institutions built on legacy systems are being forced to confront a hard reality: modernizing is no longer optional.

In a PaymentsJournal Podcast, George Malesky, Director of Partnership Development at Qualpay, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed what legacy banks are up against as instant payments become the norm. For institutions whose technology stacks need an overhaul, the options may not be ideal, but at least they exist.

Focusing on the Big Picture

When a bank tries to do everything at once, it typically ends up doing very little well. The first step toward modernization is defining a clear focus. Banks need to identify operational efficiencies and determine which upgrades will create the most leverage and opportunity.

This isn’t just about driving growth. Strengthening compliance and risk management systems is equally critical. While improvements in sales and customer experience can attract new business, foundational operational enhancements are what makes that growth sustainable.

“You’re not going to totally disrupt your core, or completely overhaul your system,” said Malesky. “But you can make things like onboarding and payments and servicing better by making sure they have updated technology.”

Getting Ready for Instant Payments

On top of existing challenges, banks must now prepare for a world of faster payments. Neither regulators nor customers are willing to accept institutions that can’t keep pace.

Speed alone isn’t the solution. Banks need the right technology and the underlying architecture to support it. Just as important is adopting a forward-looking mindset—one that anticipates future demands, especially when competing with more agile fintechs.

“You have to make sure everything works together, that the APIs and the middleware all talk together well,” said Malesky. “Sometimes it’s more about thinking of a way to work around your core rather than replacing it or going through it.”

Too often, banks overestimate the strategic value of owning their payment infrastructure while underestimating its cost. The burden extends beyond upfront investment to include complexity, ongoing maintenance, regulatory requirements, scheme updates, fraud management, and continuous innovation.

What’s critical here is treating payments as a strategic capability—not necessarily a fully owned asset. In-house solutions can offer control and customization, but they come with significant trade-offs in cost and operational burden.

Looking for a Partner

Some banks, with sufficient capital and internal resources, may choose to modernize their payment systems independently. However, many are finding success by partnering with providers that bring both experience and modern platforms.

These partnerships can accelerate transformation timelines.

“Everyone knows the old adage that every journey begins with a single step,” said Malesky. “But when it comes to siloed systems and fragmented tools, maybe it’s a handful of steps to get there at the forefront. There’s not necessarily a single bullet or a single provider that can do absolutely anything and everything that a bank will need, but you want to reduce vendor clutter and some of the complexities by having single source solutions.”

Breaking Down Silos

Partnering can speed up modernization, but it doesn’t eliminate one of the industry’s most persistent challenges—siloed systems.

Embedded solutions can reduce distractions and minimize errors, but they don’t always integrate smoothly with adjacent systems. Both legacy and modern platforms must communicate effectively to deliver real value.

Siloed systems create friction across the organization. Customers may struggle to navigate disconnected services, while banks face inefficiencies such as duplicated data and redundant processes. The impact is far-reaching.

“When a bank is not operating as one holistic system, it loses opportunities to cross sell,” said Riley. “You’re losing a line of sight on the true risk of a customer, whether there’s loans or deposits involved. They don’t necessarily have to work together, but when they do, it’s a much better experience for everyone, especially the operational people and of course the customer.”

One clear example is onboarding. Fintechs can onboard customers in minutes, while traditional banks may take up to seven days—and at two to three times the cost for merchant accounts.

“It’s really a challenge if you’re going to be that slow,” said Malesky. “When we used to text in the early stages of flip phones, we had to open up our phone and press the number 2 three times to get the letter C. It was a slow, monotonous process. But in those days, we didn’t know any different. We didn’t know what was coming with iPhones.”

Fintechs are effectively delivering the “smartphone experience” of financial services. Once customers become accustomed to that level of speed and convenience, it’s difficult to revert. If banks can’t meet those expectations, customers will look elsewhere.

Where Are Banks Heading?

Modernizing a legacy banking system involves many moving parts. It’s not enough to address current needs, banks must also align their upgrades with long-term strategic goals.

“Unless you’re ready for the future, you will not get through it,” said Riley. “It’s not just ‘Let’s get to it on a 10-year plan.’ It’s where you’re looking to go, and how quickly will you get there.”

Malesky added: “Think ahead to how you can make the customer experience that much better because that translates into more customers, and more usage for existing customers. And that’s the goal for most banks.”